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The Bank of England's trade-weighted sterling index fell to 76.5, down 1.8 per cent on the day to its lowest since late March 2009.

The sudden drop is the pound's biggest one-day fall since January last year, according to Chris Turner, head of FX Strategy at ING Commercial Banking.

He warned: 'While UK policymakers may have quietly welcomed the pound's recent weakness, they will not appreciate the kind of fast markets that can see a "sell UK" mentality developing.'

Sterling has lost nearly 10 cents against the dollar in little more than a week - hitting holidaymakers in the pocket, putting upward pressure on petrol pump prices and adding to import costs for businesses.

The pound hit a 24-year low of $1.35 last year in the worst depths of the recession.

Other factors weighing on sterling included Prudential's $35.5billion (£23.5billion) mega-deal for AIG's Asian business, which will entail heavy selling of pounds in exchange for dollars to finance the deal.

Comments last week from members of the Bank of England's rate-setting committee that more quantitative easing - creating electronic money - could be needed to shore up a fragile recovery have also put pressure on the pound.

Mr O'Sullivan added: 'The market has been running out of patience with sterling, and it has been brewing for a while. There is a very fine line between wanting a weak pound and people losing faith in our economy.'